Every quarter, many money managers have to disclose what they've bought and sold, via "13F" filings. Their latest moves can shine a bright light on smart stock picks.
Today, let's look at Passport Capital, founded by John Burbank in 2000, and known for combining macroeconomic analysis and fundamental research. Burbank, himself, is famous for having called the subprime mortgage crisis and reportedly earned a 220% return on it in 2007 -- though he lost 50% the following year.
The company's reportable stock portfolio totaled $2.9 billion in value as of June 30, 2012.
What does Passport Capital's latest quarterly 13F filing tell us? Here are a few interesting details:
New holdings include Alcatel-Lucent (NYSE: ALU) and Peabody Energy (NYSE: BTU). Telecom player Alcatel-Lucent, having fallen 65% over the past year, strikes some as a screaming bargain. But it’s burning through cash, is challenged by competition and price wars, and is seeing business drop off in its biggest networking segment, wireless. Europe’s financial woes are also not helping (the company is based in France), and cost-cutting will only help so much.
Unlike other coal concerns, Peabody Energy has been profitable, with rising revenue and earnings. The largest U.S. coal producer, it has even been called “the most powerful name in energy.” The company took on a lot of debt to buy operations in Australia, but that puts it in a strong position to supply growing Asian demand, though coal prices remain low. Still, some think that coal’s glory days are over, given the rise of alternative energies, and the growing profile of natural gas.
Among holdings in which Passport Capital increased its stake was VIVUS (Nasdaq: VVUS), which recently received Food and Drug Administration approval for its weight-loss drug, Qsymia. The stock has doubled over the past year, with some expecting Qsymia to have blockbuster potential. But the stock valuation is less compelling now, leading some to sell and look for greener pastures. Remember, too, that VIVUS has competition, such as from Arena Pharmaceuticals. Qsymia sports some possible heart risks, as well, and is not expected to be approved in Europe. Some even worry about the strength of its patent protection.
Passport Capital reduced its stake in lots of companies, including Timken (NYSE: TKR), a bearings manufacturer. The company’s valuation seems low, with a P/E ratio below six, and its revenue and earnings have been growing. It yields 2.5%, as well. Admirably, the company is committed to manufacturing in America and not outsourcing its work, which offers both benefits and disadvantages.
Finally, Passport Capital unloaded several companies, such as Las Vegas Sands (NYSE: LVS). The casino titan has been hurt by sluggishness in Las Vegas, but it’s a major player in Asia, and many investors are bullish on its prospects in places such as Macau and Singapore. Some worry, though, that its properties in Macau may end up taking business from each other. Growth there has been slowing, too, and the company has further expansion plans for Spain, Vietnam, and elsewhere. Several analysts have recently upped their expectations for the company.
We should never blindly copy any investor's moves, no matter how talented the investor. But it can be useful to keep an eye on what smart folks are doing, and 13-F forms can be great places to find intriguing candidates for our portfolios.
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